(MintPress) – In the Republican presidential debates, economic ideology oftentimes takes the for of free market arguments and capitalism. And then there’s Ron Paul’s rhetoric about the gold standard – an economic structure the United States has not used since 1933.
Wednesday marked 112 years since the Gold Standard Act had been initiated into the fabric of the United States economy. While the act died unceremoniously in 1933 after being signed by President William McKinley in 1900, the gold standard could be seen in the bigger picture as a way to stabilize the value of the U.S. currency. But the significance of the gold standard also lies in the given human rights that monetary systems remain consistent and that citizens are consistently able to afford commodities that are not affected by inflation.
In an economic system that uses the gold standard, paper money is converted into an already fixed quantity of gold. For example, a country would set a flat price for gold, say $20 for an ounce. Under that standard, $1 would have the purchase power to acquire 1/20th of an ounce of gold. In 1900, the U.S. fixed the price of gold at $20.67.
This type of economic system was created to regulate both the quantity and growth of a country’s money supply. The value of the dollar was always tied to the fixed price of gold, preventing a government entity from devaluing the power of a currency by simply printing more money.
As a result of the gold standard, the U.S. and other countries that implemented the economic system were prosperous and saw huge gains in economic growth. However, during World War I, inflationary financing brought the gold standard down, ultimately resulting in the act’s demise in 1933.
Today, gold prices are at record highs. Wednesday reports showed gold futures trading at $1,643.20 per troy ounce. Currently, no countries in the world apply the gold standard to their currencies.
Political rhetoric
Alasdair Macleod, founder of the “Finance and Economics” website, says sound money, without the manipulation of inflation, ought to be a staple practice in America. He argues that government control over finances destabilizes the entire system.
“Firstly, it is a basic human right to choose to save, without our savings being debased by the tax of monetary inflation,” Macleod wrote in an entry for The Gold Standard Institute. “Those that are worst affected by this inflation tax are not the rich, they benefit; but the poor and the barely well-off, which is why monetary inflation undermines society and why the right to sound money should be respected. If government gives itself a monopoly over money, it has a duty to protect the property rights vested in it.”
Paul has advocated for the idea of once again backing the U.S. currency with gold and abolishing the Federal Reserve – the central banking system for the United States.
“We went off the gold standard during the civil war period, and the gold price soared, a couple hundred dollars, from twenty dollars,” Paul said while appearing on Fox Business. “We lived in a different time then, in the 1970s they passed a Resumption Act and they had a three year period and a lot of part 1870s, and there was a transition. They quit printing greenbacks, they withdrew some greenbacks, they balanced the budget and we weren’t running a welfare-warfare state.”
Other Republican presidential candidates have expressed a desire to get rid of the Federal Reserve, but have never supported another attempt at a gold standard. Republican presidential candidate and former business mogul Mitt Romney believes in a free market where issues and complexities will work themselves out naturally. Las Vegas economist John Restrepo has said, “Philosophically, Mitt Romney’s laissez-faire approach is wrong.”
Macleod believes a free market, when combined with the gold standard or sound money, provides not only the best opportunity for the country to prosper, but also allows for its citizens to become more educated about what the government is spending taxpayers’ money on.
“With sound money, governments are unable to go to war without taxpayers being conscious of the true cost. This is a great incentive for peace and an electorate that accepts the benefits of free markets, and therefore peaceful trade, is less belligerent.”
Human rights
The use and mining of gold across the world doesn’t come without consequences, however. Health risks and the use of slavery to mind for gold make the precious metal not only a commodity, but a risk for those in the industry.
Exposure to cyanide, which occurs when gold is recovered from ore, can have adverse effects for both humans and the environment. Cyanide is toxic to many living organisms, even at low concentrations. Toxic cyanide is particularly dangerous, and even lethal, for aquatic creatures.
In workers involved with the gold mining and production, exposure to cyanide can lead to adverse effects, and in larger doses can be fatal within one minute of exposure.
In 2011, a Guardian investigation found that rape victims in the Democratic Republic of Congo (DRC) were forced to work in conditions of slavery to produce gold from mines. Because of militant occupation of their former residences and high instances of rape from the rebels, women are forced to work in the gold mines for 50 cents to one dollar a day.
The Guardian report details a 30-year old woman named Patience Kengwa, who said she was raped five times in two and a half years before fleeing her home. She now mines for gold and tin ore.
When it comes to the demand of gold around the world, the women are worked and pushed to their limits. Environmental charity director, Dominique Bikaba of Strong Roots, says militia members in the DRC oftentimes run the same mines women are fleeing to and that 98 percent of east Congo’s mines have some affiliation with the militia.
“These girls and women are working in the mines in conditions of slavery. They earn less than a dollar a day and are often forced to work harder than they are physically capable of working,” he said.
Source: MintPress